Much of the attention this year when it comes to restaurant bankruptcies has been focused on the biggest names, notably Red Lobster and TGI Fridays as well as brands like BurgerFi, and for good reason. The brands are big and well-known and the filings were extraordinary.
But the filing last week of the sandwich chain Eegee’s is far more typical. The vast majority of the 30 or so restaurant chain filings in 2024 have been by smaller chains and local concepts that have largely struggled to make it work coming out of the pandemic and just ran out of time.
The 53-year-old chain is an institution in Tucson, Arizona, where it is known for its sandwiches and frozen fruit drinks. The company closed five of its 30 restaurants. There had been indications in the past of struggles, notably with the closure of three restaurants last year.
The company has $24 million in secured debt to Gladstone Capital, the result of a $17 million loan taken out in 2021, plus several amendments to the original credit agreement. The company has another $3.1 million in unsecured debt, according to court documents.
Eegee’s largely blamed the pandemic for its challenges, according to a statement filed with the court by Christopher Westcott, recently appointed the interim CEO of the sandwich chain. The company lost customers, which hurt revenue. Corresponding increases in food and labor costs hurt cashflow.
Many of the chain’s restaurants have struggled to grow annual sales, Westcott wrote. “These lower volumes resulted in smaller profit margins and thus greater sensitivity to the recent, dramatic rise in labor, commodity prices and maintenance costs,” he wrote. Many of the restaurants operated at a loss, which made it difficult for Eegee’s “to meet its financial obligations in a timely manner.”
The company in March hired the investment banker Mastadon to market the assets. But Mastadon was unable to find a buyer at “an acceptable price.” Eegee’s then hired different advisors, Genzler Heinrich & Associates and Mark Samson, to oversee a restructuring.
Eegee’s plans to use the bankruptcy process to sell its assets “on an expedited basis.”
Several small, mostly regional chains have filed for bankruptcy this year, many of them blaming the pandemic and its difficult aftermath.
A lot of those restaurant chains at one point were considered potential growth brands. Eegee’s appeared to be one of those brands. It was sold in 2018 to the private-equity firm 39 Point Capital and the restaurant investor Kitchen Fund.
While a lot of these brands have recovered from the pandemic, many have not. Rising costs made life difficult for those companies that couldn’t, and if they were overleveraged, either in the form of debt or of leases, many ended up in bankruptcy.
Small, more local brands such as the fast-casual brand Roti, the fast-casual pizza brand Fired Pie, Hawkers Asian Street Food, Mary’s Pizza Shack and Red Bay Coffee have all filed for bankruptcy since mid-September. Many of these brands, much like Eegee's, tried and failed to find buyers.
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